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CMA Final · Corporate Financial Reporting · Internal Reconstruction (Capital Reduction)

Under the Companies Act, 2013, which of the following is a ground on which a company may reduce its share capital, subject to Tribunal confirmation and a special resolution?

A company may cancel paid-up share capital that is lost or unrepresented by available assets, by special resolution and with Tribunal confirmation. Cancelling untaken shares, raising authorised capital and converting shares into stock are alterations under section 61 and are not reductions of capital.

  1. ACancelling paid-up share capital that is lost or is unrepresented by available assetsCorrect
  2. BCancelling shares not yet taken by any person, which is treated as a reduction of share capital
  3. CIncreasing the authorised share capital by an ordinary resolution
  4. DConverting fully paid-up shares into stock

Explanation

Section 66(1)(b)(i) allows a company to cancel paid-up share capital that is lost or unrepresented by available assets. Cancelling untaken shares under section 61 is expressly not a reduction of capital. Increasing authorised capital and converting shares into stock are alterations under section 61, not reductions.

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